The PEI Employment Standards Board recently held an annual review of the provinces minimum wage. CFIB attended and urged the board to ‘hold the line’ on minimum wage increases. Instead, we proposed Government should make improvements to the province’s personal income tax system to help low-income workers.
Small business owners, like most Islanders, believe combating poverty is an important and worthy public policy goal. Yet, while the goal may appear simple, the solutions to eradicating poverty are not simple or one-dimensional. Limited access to housing, child care and transportation, low skill levels (particularly literacy, numeracy, and basic employment skills), and other barriers to employment such as medical concerns, disabilities, and mental health challenges all confound our ability to tackle poverty and limit the effectiveness of minimum wage as a poverty reduction tool.
While PEI’s economic outlook has improved somewhat in 2016, the national economy remains quite fragile which does create uncertainty here. CFIB urges caution when it comes to increases to the minimum wage. It is CFIB’s opinion that government should turn its focus on improvements to the province’s personal income tax system to help low-income workers as well as improved skills development programs.
Targeted tax assistance is one measure that could be used to assist individuals whose earnings are persistently stuck at minimum wage levels. PEI has the lowest basic personal exemption in Canada, which means that our minimum wage earners start paying income tax before Canadians in every other province.
In addition, PEI does not index its personal income tax brackets or exemptions to inflation, which significantly disadvantages minimum wage earners. The lack of indexing means that inflation is acting like a small tax increase every year.
As the Prince Edward Island government is now considering yet another minimum wage increase, we are asking it to take a closer look at the tax system and address how much is clawed back from low-income earners.